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EU urges fiscal, aid reforms to save resources: paper

Sep 14, 2011, 1:09 a.m.

By Juliane von Reppert-Bismarck

BRUSSELS (Reuters) - European Union policymakers may scrap subsidies for energy, water and transport and impose new taxes in a move designed to cut the bloc's use of limited resources, a draft document seen by Reuters on Wednesday showed.

A roadmap to be unveiled by the EU's executive Commission next week will lay out the executive's thinking on targets and policy proposals for the EU to use resources more efficiently in the coming years, as the bloc struggles to ensure security of supply for energy and other raw materials.

"Member states are invited to prepare plans and timetables to phase (environmentally harmful subsidies) out as part of their national reform programs," the draft said, noting that state-backed programs in the field of energy, transport and water often carry a negative environmental impact.

"The Commission will monitor and guide the phasing out of EHS in the European Semester as of 2012," the draft says, adding that by 2013 aid decisions will be made on resource efficiency grounds.

But with power over fiscal and parts of subsidy policy in the hands of national governments, and EU industry wary of adding more cost to production, it is unclear how much of the Commission's roadmap will be adopted into national legislation across the bloc.

"By 2020 (environmentally harmful subsidies) will be phased out, with transitional measures for people in need," the draft said.

Several future proposals promised in Wednesday's draft will be limited to requests for EU governments to improve their resource efficiency, but they will stop short of concrete legislative proposals, which need approval from national governments and the European Parliament.

The draft will also suggest new fiscal and economic incentives for producing resource-efficient goods.

"By 2020 the shift to a share of environmental taxation in public revenues of an EU average of more than 10 percent will create a level playing field and support the economy to achieve greater resource efficiency," the draft says.

"Member States are invited to within fiscal consolidation measures, shift taxation away from labor to environmental impacts," it adds.

In 2012, the Commission will also propose new rules that would impose environmental requirements on big public works and infrastructure projects.

The draft drew criticism both from Europe's business community and environmental activists - industry warning of an excess of red tape and activists wanting stricter rules.

"The effect of these measures on competitiveness must be carefully checked. Let's make sure fiscal policy for instance will not jeopardize the competitiveness of European industry," said Alexandre Affre, senior advisor on environment and energy at Europe's leading business lobby BusinessEurope.

Activists dismissed the roadmap was inadequate, saying it ignored the environmental and political implications of Europe's import dependence and was too weak on phasing out harmful subsidies.

"Resource efficiency is about reducing the EU's risk of exposure to harmful activities that undermine its natural resource base and its future economic and social stability," said Sanjeev Kumar of environment group E3G.

"Instead of outlining an action plan on how to reduce this risk the Commission has come forward with a collection of immature reflections without concrete action," he added.

(Reporting by Juliane von Reppert-Bismarck; Editing by William Hardy)

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